Natural gas prices in Texas plunge deep into negative ter...

What’s Happening

So basically Over the past week, spot prices at the Waha gas trading hub in the Permian Basin fell as low as -$9.

75 per million British thermal units. A quirk in global energy markets has created a stark geographic divide between the haves and the have nots, as a glut of natural gas in West Texas has produced negative prices while shortages loom over Europe and Asia amid the U. (shocking, we know)

Recommended Video Over the past week, spot prices at the Waha gas trading hub in the Permian Basin fell as low as -$9.

The Details

75 per million British thermal units, with expectations that it could hit -$10 when pipeline capacity tightens as operators perform seasonal maintenance later this year, traders told Bloomberg . That’s because drilling in the prolific Permian Basin yields both oil and natural gas.

But while an extensive network of pipelines exists to bring crude to market, there’s less infrastructure to transport natural gas, creating bottlenecks and localized surpluses. So, negative gas prices aren’t that unusual in West Texas, and have been that way more often than not so far this year.

Why This Matters

But last week saw the lowest weekly average Waha spot price on record. Since negative prices mean producers have to pay to someone to take the supply off their hands, excess natural gas is often burned off, and so-called flaring events this season are at five-year highs. Despite the upside-down price environment for West Texas drillers, they aren’t expected to pull back production because oil is lucrative enough to offset losses from gas.

This reflects broader trends we’re seeing in the business world right now.

Key Takeaways

• And the recent spike in crude since the U.
• -Israel war on Iran kicked off makes oil even more profitable.
• West Texas Intermediate has shot up 47% to nearly $100 a barrel in the last three weeks.
• By contrast, other parts of the world have seen natural gas prices surge because of disruptions from the Iran war.

The Bottom Line

Tehran has retaliated off the Strait of Hormuz, through which 20% of the world’s oil and liquified natural gas flow. Iran also attacked Qatar’s Ras Laffan Industrial City, damaging two LNG production trains that will impact about 17% of the country’s LNG exports—and repairs may take up to five years.

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